The U.S. Federal Reserve announced on Sunday that it is collaborating with some of the world’s largest central banks to enhance liquidity provision by strengthening the standing of U.S. dollar liquidity swap line arrangements.
Apart from the Fed, other central banks participating in the coordinated action include the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank.
“The network of swap lines among these central banks is a set of available standing facilities and serve as an important liquidity backstop to ease strains in global funding markets, thereby helping to mitigate the effects of such strains on the supply of credit to households and businesses,” it stated.
The move came on the heels of a deal brokered by Swiss authorities to have UBS Group buy rival Swiss bank Credit Suisse Group to prevent its disorderly collapse.
The deal followed efforts in Europe and the United States to support the sector since the collapse of U.S. lenders Silicon Valley Bank and Signature Bank.
Fed Reveals Banks Borrowing Billions in Loans
The Fed published data on March 16 revealing that banks had borrowed a combined total of $164.9 billion from the central bank in recent weeks to maintain their liquidity.That is up from $4.58 billion in loans the previous week.
Elsewhere, about $11.94 billion was borrowed through the newly created Bank Term Funding Program (BTFP), established to support American businesses and households by safeguarding institutions impacted by the collapse of SVB.
The BTFP said it provides loans for up to one year to banks, savings associations, credit unions, and other eligible depository institutions, in return for them pledging “collateral” such as U.S. Treasuries, agency debt, mortgage-backed securities, and other qualifying assets.
In keeping with tradition, the Federal Reserve did not identify the banks that took out loans in its latest statistics.